To determine the appropriate extent to which VERBUND AG should issue hybrid bonds, we must analyze its financial position, capital structure, and strategic needs based on the provided 2022 annual report facts, while applying the S&P Global Ratings methodology for Regulated Utilities and the specific guidance on hybrid issuance.

**1. Financial Performance and Cash Flow Strength**
VERBUND demonstrated exceptional financial performance in 2022.
*   **Revenue Growth:** Revenue more than doubled from ~€4.78 billion in 2021 to ~€10.35 billion in 2022.
*   **Profitability:** EBITDA increased significantly from ~€1.58 billion to ~€3.16 billion. Profit attributable to owners rose from ~€874 million to ~€1.72 billion.
*   **Cash Flow:** Cash flows from operating activities surged from ~€98 million in 2021 to ~€2.02 billion in 2022. This indicates a very strong ability to service debt and fund operations internally.
*   **Liquidity:** Cash and cash equivalents increased from ~€319 million to ~€409 million. The company has a robust liquidity position.

**2. Capital Structure and Leverage**
*   **Equity:** Total equity increased from ~€6.36 billion (Jan 1, 2022) to ~€8.32 billion (Jan 1, 2023). Equity attributable to owners is ~€7.28 billion.
*   **Debt:**
    *   Noncurrent Financial Liabilities: ~€2.84 billion.
    *   Current Financial Liabilities: ~€1.11 billion.
    *   Total Financial Debt: ~€3.95 billion.
*   **Leverage Ratio:** A rough estimate of Net Debt/EBITDA is (3.95B - 0.41B) / 3.16B ≈ 1.12x. This is a very low leverage ratio, indicating a conservative capital structure with significant headroom.
*   **Existing Hybrids:** The provided facts do not list any outstanding "Hybrid Bonds" or instruments explicitly classified as equity-like hybrids in the liability or equity sections (Equity is composed of Issued Capital, Capital Reserve, Retained Earnings, and various reserves). The "Noncurrent Financial Liabilities" are standard debt. Therefore, the starting point for hybrid bonds is effectively 0% of total adjusted capital.

**3. Strategic Needs and Capex**
*   **Capex:** Cash used in investing activities was ~€1.59 billion in 2022, primarily for purchases of property, plant, and equipment (~€1.09 billion) and acquisitions. While this is a significant investment level, it is well-covered by the ~€2.02 billion operating cash flow.
*   **Refinancing:** There is no indication of a "very high refinancing need" or "transformational M&A" that would distress the balance sheet. The company generated positive free cash flow after investing activities when considering the operating surplus, although the raw cash flow from investing was negative, the operating cash flow covers it comfortably.
*   **Regulatory Context:** As a regulated utility (hydroelectric power generation and grid operations in Austria), VERBUND benefits from a stable regulatory environment. The facts suggest strong profitability and cash generation, reducing the urgency for equity-like capital to protect credit ratings.

**4. Cost of Capital and Market Conditions**
*   **Interest Rates:** The swap curves and bond indices show a sharp increase in interest rates in 2022 (e.g., 10Y Swap average rose from -0.14% in 2020 to 1.93% in 2022). Hybrid bonds, being subordinated and having equity-like features, typically carry a higher coupon than senior secured debt.
*   **Cost Impact:** Issuing hybrids in a rising rate environment would materially increase the company's weighted average cost of capital (WACC). Given VERBUND's strong investment-grade profile (implied by low leverage and stable regulated cash flows), it can access senior debt at favorable rates. There is no "rating headroom constraint" forcing the use of hybrids to maintain an investment-grade rating.

**5. Application of Guidance Options**
*   **0%:** Fits the profile of a company with low refinancing needs, strong credit metrics, no existing hybrids, and where hybrid issuance would materially increase the cost of debt without providing necessary rating support. VERBUND's leverage is low (~1.1x Net Debt/EBITDA), and it generates ample cash. There is no "material downgrade risk" or "significant leverage pressure."
*   **3.75% - 15%:** These levels are reserved for companies with moderate to high leverage pressure, significant acquisition pipelines requiring equity credit, or those needing to optimize capital structure to preserve ratings. VERBUND does not exhibit these stress factors. Its equity base is growing organically through retained earnings (~€1.7 billion profit in 2022).

**Conclusion:**
VERBUND AG has a very strong balance sheet, low leverage, and robust cash flow generation. It does not face the refinancing walls, leverage constraints, or rating pressures that typically justify the higher cost of hybrid capital. Issuing hybrids would unnecessarily increase the cost of capital. Therefore, the recommendation is to not issue hybrid bonds at this time.

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